PLCA

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Danielle Milton
Danielle Milton Registered Posts: 23 Dedicated contributor 🦉
in AAT Level 3 (Level 6 in Scotland)
A BACS refund of £600 from a supplier has not been entered in the accounting records. Use the following table to show the adjustment you need to make to the purchases ledger control account.

The answer they give is to credit £600 to the PLCA. I do not understand how that would work. PLCA goes up with CRs and down to DRs. Why are we increasing the PLCA with this BACS refund?

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  • Cain Squires
    Cain Squires Registered Posts: 4 New contributor 🐸
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    does it say why the £600 was refunded
  • Danielle Milton
    Danielle Milton Registered Posts: 23 Dedicated contributor 🦉
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    No it just says a BACS refund of £600 from a supplier has not been entered in the accounting records. It does not say why it was refunded or anything like that. Then in the back it says the answer is a £600 CR in the PLCA.
  • coojee
    coojee Registered Posts: 794 Epic contributor 🐘
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    What do you do with payments to suppliers? You DR them to the PLCA to reduce the balance owing to suppliers. It follows therefore that a receipt from a supplier must be a CR to the PLCA. Also think about the bank entry, receipts are always DR's to the bank so they must be a CR entry in the double entry account, in this case PLCA. I know it's counter intuitive to increase the balance on the PLCA but just go with it, it is correct. If you really want to understand it think through all of the transactions:
    1. Invoice received from supplier, DR Purchases and CR PLCA
    2. Pay the invoice (it must have been paid else we wouldn't be getting a refund) DR PLCA and CR Bank
    3. Return the goods. DR PLCA and CR Returns (or CR Purchases depending on the system)
    4. What is the balance on the PLCA now? The 3 items above make: CR PLCA (-600), DR PLCA (600), CR PLCA (-600), so there's a balance of £600 brought down on the DR side of the account. This means that we're owed money. A CR balance means that we owe money.
    5. Receive the refund DR Bank and CR PLCA. There is now a nil balance on the PLCA

    Draw a.up a ledger account if you're still not convinced
  • Donna Curling
    Donna Curling Registered Posts: 59 Regular contributor ⭐
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    With Coojee on this one
    You would be entering the refund to go against the credit note. Initially you entered an invoice with an entry of Credit the Payables accounts, you then refunded and therefore had to debit the Payables account with the credit note. the refund bacs would be required as a credit entry. It is taken in the question that the credit note is already entered and only the bacs omitted.
    Donna Curling - AAT Tutor
    www.completebookkeeping.co.uk

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